Diwali shopping, the wedding season, a car booking, a property deal: this is the time of year when large amounts of cash change hands in Noida and across NCR. The income-tax law sets hard limits on cash, and the penalty for crossing them is not a small fine. It is 100% of the amount. Under the new Income-tax Act, 2025, these rules have new section numbers but the same bite.
The limits at a glance
| Situation | Cash limit | Who pays the penalty |
|---|---|---|
| Receiving cash for anything (sale, fees, gift, wedding payment) | Below ₹2 lakh from one person in a day, per transaction, or per occasion | The person who receives the cash: 100% of the amount |
| Taking a loan or deposit, or advance for property | Below ₹20,000 in cash | The person who takes it: 100% of the amount |
| Repaying a loan or deposit | Below ₹20,000 in cash | The person who repays it: 100% of the amount |
| Business paying an expense | Up to ₹10,000 per person per day (₹35,000 for transporters) | The business: the expense is disallowed |
The ₹2 lakh receipt limit was section 269ST and is now section 186 of the 2025 Act. The penalty was section 271DA and is now section 451.
The ₹2 lakh rule, in plain terms
No one may receive ₹2 lakh or more in cash:
- from one person in one day, even across several bills;
- for one transaction, even if paid in instalments on different days;
- for one event or occasion, such as a wedding.
The rule applies to individuals as well as businesses. There is no exception for relatives. A father handing ₹3 lakh in cash to his son for a wedding, or a family paying a banquet hall ₹5 lakh in cash across three days, both fall within it. Only receipts by the government, banks and post offices, and a few notified cases, are outside.
Where people get caught
- Weddings: the caterer, banquet hall, decorator or band who takes ₹2 lakh or more in cash for the wedding faces the penalty. Several payments for the same wedding count as one occasion.
- Jewellery: a jeweller cannot accept ₹2 lakh or more in cash for one purchase. See our Dhanteras gold note.
- Car and two-wheeler dealers: a cash down payment of ₹2 lakh or more on a vehicle is barred.
- Property: any advance or earnest money for land or a flat must be below ₹20,000 in cash. A cash "token" of ₹50,000 to a seller is already a violation.
- Cash gifts: receiving ₹2 lakh or more in cash as a gift breaks the rule, even if the gift itself is tax-free.
- Loans between friends or family: taking or repaying ₹20,000 or more in cash is barred. Use a bank transfer and a simple loan note.
What the department can see
Cash leaves a trail. From 1 April 2026, the new rules require PAN for:
- cash deposits or withdrawals totalling more than ₹10 lakh in a year across your bank accounts;
- hotel, restaurant and banquet bills above ₹1 lakh;
- property deals above ₹20 lakh, and vehicles above ₹5 lakh, including two-wheelers;
- any purchase of goods above ₹2 lakh, including jewellery.
Banks also report large cash deposits to the department, and it all appears in your AIS. A wedding vendor or jeweller who deposits the season's cash in one go will be asked where it came from.
Is there any way out of the penalty?
The penalty can be waived if you show a reasonable cause for the cash transaction, for example a genuine medical emergency in a place with no banking access. "The customer insisted" or "everyone pays cash for weddings" is not accepted. The safest course is not to take the cash in the first place.
A checklist for the season
- Keep any single cash receipt, per person, per day and per occasion, below ₹2 lakh.
- Keep loans, deposits and property advances below ₹20,000 in cash.
- Pay wedding vendors, jewellers and dealers by UPI, card or bank transfer.
- Take large family gifts by bank transfer, with a short gift letter.
- Businesses: pay expenses above ₹10,000 per person per day through the bank, or lose the deduction.
How Vitt-Marg helps
We are in Sector 63, Noida. We advise families and businesses on structuring large payments, reply to notices about cash deposits and AIS mismatches, and handle penalty proceedings. See our income tax consultant services in Noida.
General information, current as of October 2026, not advice for a specific case. GST and income-tax rules change often — check with us before acting on it.